Should You Investigate Texas Instruments Incorporated (NASDAQ:TXN) At US$163?

Texas Instruments Incorporated (NASDAQ:TXN) saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$186 and falling to the lows of US$161. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Texas Instruments' current trading price of US$163 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Texas Instruments’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Texas Instruments

What's The Opportunity In Texas Instruments?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.05x is currently trading slightly below its industry peers’ ratio of 19.83x, which means if you buy Texas Instruments today, you’d be paying a decent price for it. And if you believe that Texas Instruments should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Texas Instruments’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Texas Instruments look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a relatively muted profit growth of 0.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Texas Instruments, at least in the short term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in TXN’s growth outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at TXN? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on TXN, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For instance, we've identified 2 warning signs for Texas Instruments (1 makes us a bit uncomfortable) you should be familiar with.

If you are no longer interested in Texas Instruments, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.